This is sort of a follow up to Karen’s article a few days ago highlighting gold and silver as a sector that you’ll want to pay attention to in the coming weeks. Here is a ratio chart of the Gold:USD. If you are unfamiliar with what a ratio chart is here is Stockcharts definition:

“You can divide any security by another and chart the results by entering the first security’s symbol, a colon (:), and then the second security’s symbol. For example, to compare how Intel has been doing relative to the Semiconductor Index, you’d enter “INTC:$SOX” in the “Enter Ticker” box of our SharpChart tool.”

One of the main reasons I’ve turned bullish on this sector is how we’ve finally broken out of the consolidation period we’ve been in since May. The upper boundary of that sideways movement should provide strong support for this breakout and any dips down there should be bought.

Pullbacks to the 10 level on RSI (2) could be a oversold signal as could the Slow Sto 5, 1. Of course I advise using whichever indicators you are most familiar with and I’m just sharing these to get your creative ideas flowing.

I’ve been previously bearish on precious metals and their recent run have convinced me that this rally could have more legs and at least for the short term one should be focusing on the long trade in this sector. Any break below the consolidation would likely lead to the severe sell off I previously felt was going to materialize.

Here is a chart of the US Platinum & Precious Metals Index confirming the strength of the chart above. SLW has been the leader and will likely pull back the least. I like the other 3 as well as they have mirrored this index closely and should be strong performers as well.

One Response to “Ratio Chart Looks Bullish For Gold”

We turned positive on gold and silver about mid to late July based on my “RSI Range Rules” turning to up. We also saw my “positive reversal” patterns start to suggest higher prices for both. The gold has been trading sideways for a while and was due to breakout. We viewed the action as corrective and the breakout is the start of a new leg to the upside and the continuation of the long term uptrend. It may be a little overextended here, but pullbacks should be well supported.